Ask the Mortgage Experts

Interest only and Lending into Retirement

We have a £352K interest only mortgage agreement upto August 2015 on a house valued at £799K . We plan - and want - to downsize to pay off this mortgage. However we would like to examine options to stay at our current address on similar or better interest-only mortgage terms beyond August 2015 - giving us more time to review and take up these downsizing options.

As we are in the process of retiring, we know that we cannot meet the traditional criteria for a repayment mortgage of the same size - but we can demonstate we can afford to continue to make the current mortgage repayments out of retirement income and investments - upto at least age 75 (2025!) if we wanted to stay at this address that long! Note we have a top grade (999) credit rating, have never had problems servicing the current mortgage, and have no redemption penalties to pay should we decide to move to another mortgage company.

I am not sure how unusual or typical is our query? If we cannot get such an extended time period then we will definitely downsize in the next 2-3 years. However appreciate your independent and confidential advice on any options we may have...

Tim

Interest only is a hot topic at the moment because the Financial Services Authority (FSA) is concerned at the number of people who do not have any repayment vehicle in place other than selling their home. You are in the fortunate position of having plenty of equity and downsizing is possible, however for many people they have little or no equity and can either not redeem their mortgages or have no way to purchase a new home once they have.

The other hot topic is lending into retirement, with the FSA again concerned about people taking loans into retirement that will not be affordable once they lose their earned income. Again you seem to be in the fortunate position of having retirement income and investments so that this is not a problem for you.

Taking their lead from the FSA, lenders have tightened up their interest only and lending into retirement criteria. It is now much harder to find lenders willing to use "sale of security" as a repayment method, with most insisting on some sort of investment vehicle and anyone wanting to borrow into retirement has to be able to prove they can afford the mortgage once they retire.

From what you have said, I am pleased that it looks like we can help you find an interest only mortgage that runs until you reach age 75. Please call 0344 346 3672 and tell one of our independent mortgage advisers the date and title of your question, they will then take further personal details before finding the right mortgage for your circumstances.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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